In the current article, we will take a look at the top 10 stock picks of Adam Usdan’s Trellus Management. If you want to skip our discussion of Trellus Management’s history, investment philosophy, and hedge fund preference, go directly to Top 5 Stock Picks of Adam Usdan’s Trellus Management.
Adam Usdan is the founder of Trellus Management and has been in the investment advisory industry for more than 18 years. Moreover, Mr. Usdan has been investing in real estate for more than 30 years. His career in the investment industry began in 1987 at Odyssey Partners. Mr. Usdan holds an MBA degree from the Kellogg Graduate School of Management at Northwestern University, where he majored in Finance, Marketing, and Accounting. Moreover, he holds a BA degree in English from Wesleyan University. Furthermore, he is currently a Trustee of Wesleyan University and serves on the board for Jonas Nursing and Veterans Healthcare.
Trellus Management owns stocks in several well-known companies as of the end of the third quarter of 2021, such as The Walt Disney Company (NYSE: DIS), Genius Sports Ltd (NYSE: GENI), and Ebix Inc (NASDAQ: EBIX). The hedge fund also holds significant shares of FedEx Corporation (NYSE:FDX), Uber Technologies, Inc. (NYSE:UBER), and Alibaba Group Holding Limited (NYSE:BABA).
We picked the top 10 holdings of Trellus Management from the fund’s Q3 portfolio.
Why should you care about hedge fund activity? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Adam Usdan of Trellus Management
Top 10 Stock Picks of Adam Usdan’s Trellus Management
10. The Walt Disney Company (NYSE:DIS)
Trellus Management’s Stake Value: $2.233 million
Percentage of Trellus Management’s 13F Portfolio: 1.62%
Number of Hedge Fund Holders as of Q2 2021: 112
The Walt Disney Company (NYSE: DIS) is a multinational conglomerate that operates in the entertainment and media industry. The company is headquartered in Burbank, California, and is the most well-known of the top 10 stock picks of Adam Usdan’s Trellus Management. Ken Fisher’s Fisher Asset Management holds 11,105,472 shares of the company which have a combined worth of roughly $1.878 billion.
9. Impinj, Inc. (NASDAQ:PI)
Trellus Management’s Stake Value: $2.263 million
Percentage of Trellus Management’s 13F Portfolio: 1.64%
Number of Hedge Fund Holders as of Q2 2021: 20
Headquartered in Seattle, Washington, Impinj Inc (NASDAQ: PI) is a well-known manufacturer of RFID (radio frequency identification systems) services and software.
On October 27, Impinj Inc (NASDAQ: PI) announced Q3 revenues of $45.2 million, beating estimates of $44.13 million by $1.07 million. Due to the revenue growth, James Ricchiuti, an analyst at Needham Investment Management, LLC, has raised the company’s price target from $55 to $63 and has declared Impinj Inc (NASDAQ: PI) to be a “BUY” on October 28.
8. Ebix Inc (NASDAQ:EBIX)
Trellus Management’s Stake Value: $2.962 million
Percentage of Trellus Management’s 13F Portfolio: 2.15%
Number of Hedge Fund Holders as of Q2 2021: 8
Ebix Inc (NASDAQ: EBIX) uses SaaS (Software as a Service) to design and provide customized software to the healthcare, financial, and insurance industries. Trellus Management owns 110,000 shares in the company as of Q3 2021, which are worth roughly $2.9 million. Along with Impinj Inc (NASDAQ: PI) and The Walt Disney Company (NYSE: DIS), Ebix Inc (NASDAQ: EBIX) is one of the top 10 stock picks of Adam Usdan’s Trellus Management.
Wasatch Global Investors, an investment management firm, published its “Wasatch Small Cap Value Fund” investor letter at the end of the first quarter of 2021 in which it mentioned Ebix Inc (NASDAQ: EBIX). Here is what the firm had to say about Ebix Inc (NASDAQ: EBIX):
“The Fund’s leading detractors were largely information-technology companies, which wasn’t particularly surprising given the broader rotation out of tech and into other segments of the value space. Shares of Ebix, Inc. (EBIX) declined after the company’s auditor resigned due to control issues surrounding a new line of gift cards. We don’t think the misstep was intentional, but rather a case of management erring by not focusing more closely on the audit process. We’ve known Ebix for more than 10 years, and we believe the investigation will lead to improved oversight in the future. Still, we are monitoring the situation closely.”
7. Rimini Street Inc. (NASDAQ:RMNI)
Trellus Management’s Stake Value: $3.127 million
Percentage of Trellus Management’s 13F Portfolio: 2.27%
Number of Hedge Fund Holders as of Q2 2021: 18
Rimini Street Inc. (NASDAQ: RMNI), headquartered in Hilden, Germany, develops software support services for business clients. Trellus Management owns 324,010 shares in Rimini Street Inc. (NASDAQ: RMNI), which covers 2.27% of its portfolio and is worth over $3 million.
On November 9, Brian Kinstlinger, an analyst at Alliance Global Partners, downgraded Rimini Street Inc. (NASDAQ: RMNI) with a “Neutral” rating from its previous position of “Buy”. However, the price target was raised from $10 to $10.50. On November 3, Rimini Street Inc. (NASDAQ: RMNI) announced its Q3 2021 revenue to be $95.64 million, which beat estimates by $720,000 and demonstrated a 15.9% year-over-year growth.
Greystone Capital Management, an investment management firm, mentioned Rimini Street Inc. (NASDAQ: RMNI) and shared its stance on the company’s future prospects in its first-quarter 2021 investor letter. Here is what the firm had to say about Rimini Street Inc. (NASDAQ: RMNI):
“During the quarter I significantly added to client holdings in Rimini Street which has now become a top four position due to both additional purchases and share price appreciation from our initial cost basis. The reasoning behind the purchases, especially at prices 70-100% above where we initially started buying include information gleaned from management during the company’s February investor day event, as well as what I believe to be the business hitting an operational inflection point. I wrote about Rimini Street in the Q3 2020 letter, but things have progressed quickly in a positive way and there have now emerged what I believe to be multiple paths to achieve a very favorable return moving forward with a strong risk/reward profile.
With a clear valuation disconnect in place from an EV/ARR or EV/Gross Profit basis, Rimini Street is currently one of the cheapest profitable SaaS related stocks among a universe of inferior software companies. While I can point to some clear reasons for the undervaluation (which I believe will be transitory), the valuation discrepancy compared to lower quality businesses trading at high multiples of revenue does not make sense to me. Furthermore, as discussed below, I believe the company is taking the necessary steps to clean up the story which will have the effect of shining a light on the strength of
the business and competitive position.In a recent industry report, Gartner estimated the size of the third-party software support industry will increase by nearly 3x within the next three years (from $300mm to $1.0B) and has highlighted Rimini as the clear leader in the space with greater than 80% market share. Rimini backed up those estimates by issuing for the first time their five-year strategic plan to reach $1 billion in revenues and 20-25% operating margins by 2026. While estimates five years out should always be taken with a few grains of salt, conversations with industry experts reveal this target to at least be credible. And I believe credible is all that is needed here. In my view, this represents a situation where I believe one does not have to be precise in order for the investment to work. In fact, failing to meet the above targets for growth and margins laid out above should still result in a stock price significantly higher than the current price of $8.20/share. This is a stock that could increase 50-100% JUST to trade closer in line with slower growing, lower margin comps, and still be considered very cheap. If I am even partially correct about the prospects for the company, I believe shares could be worth multiples of the current trading price, which would represent perfect example of my investment strategy playing out – find wide mispricings and hold until the mispricings correct.
In addition to the core business hitting what I believe to be an operational inflection point, Rimini is now beginning to cross sell their Application Management Services (AMS) into the existing client base. The company has stated a potential $1B revenue opportunity just by executing on this front, not to mention that each AMS contract cross-sold will help drive an ARPU increase from the core support business that is multiples above current levels.
Lastly, there remains what I believe to be two catalysts that will hopefully improve the market’s perception of the business, and one of which that will help clean up the capital structure. The company has completed two capital raises in the last six months and has begun purchasing (to retire) their Series A Preferred Stock, which comes at a hefty price of 13% dividend payments per year, or around $18mm in interest on a $154mm balance. I believe the company is positioning itself to repurchase the preferred stock by July of this year, which will reduce cash outlays for interest, lower their cost of capital and clean up the capital structure. In addition, before or during 2022, investors should finally receive some clarity surrounding the company’s trial with Oracle (Oracle vs. Rimini II), where I believe courts will rule in Rimini’s favor and cause the lawsuit overhang to disappear further saving more money in litigation expenses. Rimini has been able to continue to execute in a big way despite these two overhangs, and the elimination of them, while independent of the actual business execution should help clean up the story and move the shares higher in the short term.”
6. Genius Sports Ltd (NYSE:GENI)
Trellus Management’s Stake Value: $4.366 million
Percentage of Trellus Management’s 13F Portfolio: 3.18%
Number of Hedge Fund Holders as of Q2 2021: 39
Genius Sports Ltd (NYSE: GENI) is a technology company that offers data management and video streaming services to media companies and sports leagues. Like Rimini Street Inc. (NASDAQ: RMNI) and The Walt Disney Company (NYSE: DIS), Genius Sports Ltd (NYSE: GENI) is also one of the top 10 stock picks of Adam Usdan’s Trellus Management according to our analysis.
On October 11, Jason Bazinet, an analyst at Citigroup Inc., initiated the coverage of Genius Sports Ltd (NYSE: GENI) with a “Buy” rating and fixed a price target of $22. The same day, Robin Farley, an analyst at UBS Group AG, initiated a “Neutral” coverage on Genius Sports Ltd (NYSE: GENI) and fixed a price target of $18.
Alger, an investment management firm, published its Q3 2021 investor letter “Alger Mid Cap Focus Fund” in which it mentioned Genius Sports Ltd (NYSE: GENI) and provided some insights about the company. Here is what Alger has to say about Genius Sports Ltd (NYSE: GENI) in its Q3 2021 investor letter:
“Genius Sports Limited was among the top detractors from performance. Genius Sports provides online sportsbooks with data from sports leagues. We view it as a picks-and-shovels sports betting company, so it isn’t dependent on the success of an individual gambling operator. The global online sports betting (OSB) market is forecast to grow from approximately $31 billion in gross gaming revenue (GGR) in 2020 to approximately $65 billion in 2025, which is a compound annual growth rate of 16%, and we believe Genius is positioned to increase its market share. The company has a 40%-50% market share of sports events currently and an ambitious target to reach a 5% take-rate on this global gaming market compared to its current take-rate of 1.75%. The take-rate is the portion of gross revenues generated by online gambling operators that Genius receives. The company also has the potential to benefit from the structuring of legalizing online gambling in New York and Florida. We believe the structuring is unfavorable for online gambling operators, but positive for providers of sports data. In our view, the company is also well positioned to benefit from the increasing importance of official data, a growing ad-tech business and the potential to cross sell additional services to sportsbooks, such as managing risk and trading of betting markets and streaming services.
Shares of Genius Sports were volatile during the third quarter due to the expiry of pre-IPO shareholders’ lockup period and an existing competitor, Sportradar, going public via an IPO. A selloff of high-growth stocks in early July also hurt the performance of Genius Sports shares. While Sportradar gives investors another option to invest in sports betting, we believe Genius is well positioned to gain market share due to its exclusive NFL partnership.”
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Disclosure: None. Top 10 Stock Picks of Adam Usdan’s Trellus Management is originally published on Insider Monkey.
